Local hospital financial information compiled by the state shows that UPMC Horizon and United Community Hospital had relatively smooth sailing last year, while Sharon Regional Health System hit choppy waters.

The Sharon health-care provider came up on the negative side in two key areas: operating margin of minus-3.45 percent and total margin of minus-2.77 percent in fiscal 2001, which ended June 30.

A positive operating margin indicates a hospital is taking in more revenue for operations than it costs to run the facility.

Total margin gives the overall financial health of a hospital.

Figures were compiled by the Pennsylvania Health Care Cost Containment Council, a state agency charged with monitoring health-care costs.

Financial results for Sharon Regional clearly show the hospital is struggling a little bit, said Joe Martin, the council's communications director. "But there's nothing here to cause your heart to beat faster."

Operating expenses at Sharon climbed, in part, because of $5 million the hospital paid last year as its portion of a high-profile malpractice award.

The hospital is suing one of its insurance providers, National Union Fire Insurance Co., Pittsburgh, to recoup its portion of the settlement. The insurer refused to pay, saying it wasn't properly notified of the suit. The hospital disputes that.

Ed Newmeyer, director of marketing and community relations for Sharon Regional, focused on the positive aspects of the council's report.

The hospital had a three-year average change in net patient revenue of 11.5 percent, which is a clear indication more patients were choosing the hospital for their care, Newmeyer said.

Also, he pointed to discharge data by the council which shows Sharon Regional has grown to become the county's largest provider of health-care services, with a 41 percent market share, compared to Horizon's 35 percent and UCH's 9 percent.

"A large percentage of that growth occurred due to the opening of Sharon Regional's Heart Institute, which is Mercer County's only provider of open-heart surgery, angioplasty and other advanced heart services,'' Newmeyer said. "Enhancements" to the health system's Cancer Care Center, Women's Center and Behavioral Health Services also brought in more patients, he said.

Growing costs at Sharon Regional were due to developing the Heart Institute and Cancer Care Center, Newmeyer said. Also, significant increases were seen in pharmaceutical costs, the effect of two employee pay increases last year, increased expenses in complying with new governmental regulations and costs associated with the addition of 237 employees.

Sharon Regional posted a $2.898 million loss in 2001, but it had plenty of company; one-third of Pennsylvania's hospitals lost money last year, according to the council.

Excluding the malpractice payment, Sharon Regional had a profit of $2.1 million during the year, compared to the previous year's $4 million profit, Sharon Regional said.

In a January report by Standard & Poors, a New York bond-rating firm, Sharon Regional said it was projecting a $1.6 million operating profit for fiscal 2002.

But Newmeyer acknowledged Monday the hospital system won't be able to meet those projections due to large increases in drug costs and insurance premiums. He said he didn't know what the revised forecast might be.

With 1,850 employees Sharon Regional is Mercer County's largest employer.

United Community was the top performing hospital in northwestern Pennsylvania in terms of having the highest operating margin at 5.64 percent. The Pine Township hospital had the second-highest total margin in the region at 9.84 percent.

For 2001 UCH generated a $2.9 million profit. "Last year was a fairly good year,'' said John Lewis, UCH's chief executive officer. "I think it's just the ongoing focus on details and expense controls.''

But, he cautioned, the current fiscal year is proving to be much more difficult. He attributed the tough year to rising expenses, particularly in wages, because the hospital has to compete with others in the industry for an ever smaller pool of nurses and pharmacists.

In 1994, Pennsylvania graduated 6,000 nurses; last year 2,900 nurses graduated in the state, Lewis said.

Horizon's operating margin and total margin for 2001 were 2.79 percent and 4.44 percent respectively. For 2001, Horizon had a profit of $3.581 million.

In a brief written statement, Larry Heinike, Horizon's chief executive officer said, "UPMC Horizon's continued focus on people, program development, and services produced a positive financial performance for us over the past three years including fiscal year 2001.''